Dell sets $1-b sales target, says high tariffs are ‘taxing’

TNNMar 21, 2007, 01.12am IST

NEW DELHI: Less than four months away from opening its manufacturing unit in India, global PC maker Dell Inc's CEO Michael Dell on Tuesday said the company is moving towards doubling its sales turnover in the country to $1 billion, but warned that existing duty structure on computers could obstruct market growth and hamper investments. "Dell India is today a $0.5 billion enterprise, and last year we grew 70% year-on-year. We are rapidly heading towards $1 billion," Mr Dell said at a conference here.

Mr Dell's visit to India comes at a time when the company is under tremendous pressure globally — its Q4 profits tumbled 33% on weak laptop and notebook sales, and the company is struggling with issues such as unresolved US federal accounting probe, customer service complaints, and loss of market share to arch rival Hewlett Packard. Mr Dell, who was reinstated as CEO of the company replacing Kevin Rollins earlier this year, warned that tariffs and taxes in India still comprised a whopping 20-25% of the computer cost. "The tariffs are far higher than those in other countries in the world. This system is taxing the progress and is not the best way to go. We will scale up our investments consistent with the opportunity in the market," he said.

He said India was losing out on major investments from its suppliers due to high incidence of taxation on IT products. "This year we will spend $19 billion with suppliers in China and Taiwan. Unfortunately, the comparable figure for India is nil. So India is missing an opportunity to attract our 86 suppliers who have signed statement of support with us. In fact, one of the suppliers is planning a $5 billion investment in Vietnam, and not in India," he said.

At present, the excise duty and CVD on personal computers is 12%, while the customs duty on 217 items including the computers is nil. The excise duty on peripherals like printers, mouse, monitors, keyboards and motherboard is 16% along with 4% additional duty. In excise duty in case of HDD, FDD, microprocessors, CD-ROM, DVD Drive and USB is nil, although these too attract a 4% additional duty.

Mr Dell's day-long whirlwind trip to India on Wednesday was packed with meeting with Communications and IT Minister Dayanidhi Maran, interaction with company employees, and addressing top industry honchoes at a CII forum in the capital.

Dell hopes to kickstart its manufacturing facility in Sriperumbudur, near Chennai, in July this year. The manufacturing plant will crank-out 400,000 units annually, initially for the domestic market, and cut delivery lead time by about 50%. Dell's Asia Pacific manufacturing operations include Penang, Malaysia and Xiamen, China. Globally, the company also builds computers in Austin, Texas, Nashville, Tenn., and Winston-Salem, NC, in the United States; in Limerick, Ireland; and in Eldorado do Sul, Brazil.

He said Dell has already become the number one player in the commercial market. In server and storage business, Dell has grown marketshare to 19% from 9% within four quarters. In India, the company is also looking at alternate models to grow the market including greater focus on consumer segment, low-cost computers and machines suited to India conditions.

Mr Dell said the company's research centre in India, which was designing systems for the world market, would also work on India-specific systems. Dell currently ranks fourth after HP, HCL and Lenovo in the Indian market, where PC sales this year are projected to touch 6.5 million.

Dell's CEO said the company has created a division to look at the consumer business and in India, there would be a greater focus on this segment. "We have sought approval from government to sell our computers to consumers online," a Dell official in India said. The company already has permission to sell its products online to businesses and enterprises.

Dell, which has pioneered the model of selling directly to consumers, is opening display centres in its largest market, the US, as part of its greater focus on home market. Similar display centres could come up in India too. "We are looking at reaching out to customers in a big way," he said.